US court begins hearing Wahaha case
March 17, 2009 | BY
clpstaff &clp articlesLatest episode highlights importance of control of IP rights
A Superior Court in Los Angeles has started to hear the case filed by French food maker Danone against its Chinese partner Wahaha. The case is part of the companies' long-running fight over the sale of drinks branded with the trademark Wahaha outside their joint ventures, and illustrates the importance of choosing the right venture partner, especially where IP issues are concerned.
The writ was originally filed in June 2007. Danone claimed in a statement that Wahaha was “selling products which are the same as those sold by Wahaha joint ventures and is making use of the joint ventures' distributors and suppliers,” according to a report by the China Daily.
A Danone spokesperson was quoted as saying that “the hearing is dealing with procedural issues” and “does not address the merits of Danone's claims against the defendants”.
Danone and Wahaha set up five joint venture companies in 1996 to sell a range of drinks including bottled water and fruit juices. Danone took a 51% stake in the operations and says all Wahaha trade marks should have been transferred from Hangzhou Wahaha Group to the joint venture companies.
The legal battle began when Danone announced on April 2007 that negotiations with Zong Qinghou, chairman of the Wahaha joint venture, had broken down. Danone has been suing Zong and the Chinese shareholders to the joint venture for setting up companies which sell products that competing with those made by venture companies and are illegally branded with the Wahaha mark.
“The key issue in the dispute is whether or not the trademark assignment signed between the two parties in 1996 is still valid,” said Ma Qiang, partner of Unitalen Attorneys at Law.
But the assignment between the two has not yet been approved by China's Trade Mark Office. The PRC Trademark Law says a trademark assignment must be recognised by the Office to be valid.
In December 2007, the Hangzhou Arbitration Commission ruled that the trademark assignment signed between the two parties in 1996 was terminated. Meanwhile, the Arbitration Institute of the Stockholm Chamber of Commerce is still reviewing the case.
According to Ma, it is up to the Chinese court to decide whether and how to enforce the possibly conflicting decisions made by the various bodies involved.
“Of course it will involve many non-legal factors in the settlement and during the long proceedings, and it is possible for both parties to reach a global settlement in the end,” he said.
Peter Yuen, a partner of Freshfields Bruckhaus Deringer said that the choice of partner is absolutely essential to the success of a joint venture. “Expectations of the two parties have to be managed, and in many cases, they are reinforced by contractual arrangement,” he said.
Yuen said that it is important for parties to understand their different objectives, which might be potentially conflicting before they enter into a partnership.
“In a joint venture where certain intellectual property rights form a substantial part of the assets, the foreign party would do well to ensure that it has actual control over the use, if not ownership, of the relevant intellectual property rights, rather than trying to deal with the problems when the relationship with its Chinese partner breaks down,” said Yuen.
This premium content is reserved for
China Law & Practice Subscribers.
A Premium Subscription Provides:
- A database of over 3,000 essential documents including key PRC legislation translated into English
- A choice of newsletters to alert you to changes affecting your business including sector specific updates
- Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
Already a subscriber? Log In Now